From fish-shaped coffins to slaughtered bulls, funerals in Africa are lavish affairs, providing a lucrative opportunity for insurance companies looking for business in some of the world’s fastest growing economies.
Many of the insurance industry’s big money-spinners in developed markets, like motor insurance and cover for household goods, are irrelevant to the majority of Africans who cannot afford a range of expensive personal possessions.
But high death rates and low savings levels mean funeral insurance is proving an easier sell among people daunted by the cost of funeral ceremonies that can stretch to several months of income.
“That’s the whole problem with it. People think that if you want a small intimate funeral, you don’t have money,” said Emily Chauke, a 43-year-old cosmetics consultant from Johannesburg who pays US$64 a month for family funeral cover.
“They have that thing of proving people wrong, that ‘I can afford to give my father or mother a big funeral’,” she said.
Africans are by no means alone in spending heavily on honouring their dead. But funerals on the continent are more frequent per head of population than elsewhere in the world.
In South Africa, the continent’s biggest economy, the death rate is more than 17 per 1 000 people a year, nearly double the global average. And six of the 10 countries with the highest death rate are in Africa, according to the CIA World Factbook.
While mortality rates are high, though, they are also falling –– an attractive combination for insurers which raises the prospect of customers paying into their policies for longer periods.
High unemployment and above-average birth rates across much of Africa also mean employees can have many dependents, making it more likely they will seek funeral insurance.
“There’s a big demand for it because of the cultural behaviour that we need to have these big dignified funerals,” said Jacky Huma, head of micro-insurance at the South Africa’s Financial Services Board (FSB), which estimates funeral premiums in the country totalled US$494 million in 2011.
While that is just under 2% of all long-term insurance in the comparatively developed South African market, she said demand was growing rapidly, a point echoed by global bank Standard Chartered, which said burial cover was also a crucial way of winning new customers in less developed markets.
“Funeral insurance cover, specifically, remains a leading product in most of our markets, and currently contributes to more than 60% of the bank’s individual life insurance sales (in Africa),” said Gautam Duggal, the bank’s head of bancassurance for Africa.
Standard Chartered’s bancassurance business is seeing double-digit percentage growth in annual insurance premiums in five African markets and believes personal insurance on the continent, excluding South Africa, is less than 5% of its market potential.